Sustainable Investment Awards 2021

Most transparent credit rating agency: Fitch Ratings

Fitch picked up the title of Most transparent credit rating agency for the third year in succession, as judges again rewarded the breadth of its ESG Relevance Scores.

The scores show how ESG factors affect credit ratings from the sector to entity level. All criteria by which the scores are generated are free to access on Fitch's ESG website.

Andrew SteelIn 2020, Fitch launched Relevance Scores for supranationals. The move meant the scores now cover all asset classes. Similarly, Fitch rolled out a 'data feed' to enable users to access relevance score data faster and more conveniently.

It also claimed to be the first credit rating agency to launch a pilot report that evaluates the vulnerability of sectors' and entities' creditworthiness to ESG-driven risks in a 2°C warming scenario to 2050 through Vulnerability Scores; a Vulnerability Scores report on utilities, and oil & gas and chemicals followed.

In contrast to credit ratings, which consider the near future, Vulnerability Scores "reflect pressures from ESG factors that could change ratings over much longer timeframes in a scenario where greenhouse gas emissions are cut sufficiently to limit global warming to 2°C," Fitch said.

Fitch also introduced ESG 'heat maps' to illustrate relevance of individual ESG topics to credit ratings.

Fitch also provides its ESG research free-of-charge via a dedicated ESG website. It included more than 40 in-depth ESG reports in the period under review on issues such as deforestation, climate regulation, water scarcity, ESG and the pandemic, ESG disclosure standards and stranded assets.

Andrew Steel, head of sustainable finance at Fitch, told Environmental Finance: "Having grown accustomed to seeing our relevance scores, investors were naturally curious about our views on longer-term credit risks and climate change. Our scenario-based time series of Vulnerability Scores, which show how credit risk builds up across, countries, regions, sectors and sub-sectors, are specifically designed to provide insight to investors and market participants on how the transition to low carbon economies is affecting longer-term credit risk.

"In 2021 we have our sights set on further increasing our presence and reach in ESG, whilst maintaining our reputation for quality, in-depth and independent insights and opinions" Steel said.